Advantages of SBA Loans over Other Small Business Financing Alternatives
Getting small business loan is a daunting task, both in terms of formalities and time taken for funding. There are plethora of Real Estate Loan Providers USA engaged in providing financial assistance to the small business owners. One can look for Commercial Real Estate Financing Company or banks for getting loans. SBA loans are the best loan product in the market for small business lenders without any doubt. SBA offer many different kinds of loan products for small businesses. However, there are different paths to get it quickly and use it. SBA loans usually come with many advantages such as lower interest rates, longer repayment terms etc.
US small business administration has objective to develop small businesses throughout country. In order to attain the objective, it has introduced SBA programs, where they guarantee bank loans for small businesses. Hence, SBA loans. In this way, small businessowners are able to get loan through a nationwide network of lenders. One of the most important benefits of SBA loans is that a certain percentage of each loan is guaranteed by SBA. It reduces the risk of banks with entrepreneurs qualified for the loans. It is important know that SBA doesn’t lend money itself. It leaves up to banks and other Real Estate Loan Providers USA to make the loans safer for lenders
There are mainly three types of SBA loans, each of them having its terms, conditions, and advantages:
- SBA 7(a) loan, for as high as $5.5 million in cash with terms up to seven years
- CDC/504 loans specifically mean for buying real estate and equipment and have terms up to 25 years
- SBA microloans are provided for a maximum amount of $50,000, which can be repaid for up to six years
These loans are designed to accomplish different business purposes such as financing new or small business, major equipment purchases etc. The SBA 7(a) loan is the most common and flexible loan, which is a term loan that goes up to 10 years.
Not every small business loan fits for everyone. It is important consider all factors before applying for a loan. For instance, some business owner may need cash faster than SBA loans can allow for and others may not be able to fulfil all the formalities associated with qualifying it and hence, they should look for other Real Estate Financing Company or lender to fulfil their needs. So you can always work on building your business and graduate into an SBA loan at later stage to reap benefits out of it.
- Small business loans usually cost higher in the long run. However, when you take SBA loans, there interest rate is much lower than other alternatives for commercial loans taken from any Commercial Real Estate Financing Company. It gives you advantage of getting loan at rates as low as 6.75% on an SBA 7(a) loan. The interest rates for CDC/504 loans and microloans are equally inexpensive.
- A small business owner has to access lots of business financing to meet its capital needs. With the emergence of alternative Real Estate Loan Providers USA, business owners have now a world of options of non-bank business loans that are easier to qualify for. However, if you can qualify for SBA loans, it allows you to borrow up to $5.5 million through the 7(a) loan program, which is a huge sum of capital for investment in business. As SBA guarantee up to 85% of loans in case of borrower default, banks feel more comfortable to extend loan to businessowners qualified for SBA loans.
- It is equally important for a business owner to find a loan with easy repayment terms. SBA loans often have longerrepayment terms so they don’t put financial strain on your business. Most of the other small businessloans have shorter repayment terms. On the other hand, SBA loans provide greater cushion to loan seekers with monthly payments for 25 years for real estate, 10 years for equipment, and up to seven years for working capital.
- SBA loans also have lower down payment than other commercial loans other types of loans. For instance SBA loans require you to make only 10%-20% down payment for an SBA 7(a) loan or a CDC/504 loan and no down payment is required for SBA microloans.